Executive Summary

The U.K.’s Competition and Markets Authority (CMA) published its provisional findings on the planned merger of leading grocery retailers Sainsbury’s and Asda. 

• The CMA stated: “We have provisionally found that, should the two merge, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the U.K.” 
• Sainsbury’s refuted the CMA’s claims, while its shares fell 15.5% on the back of doubt the merger will proceed. 
• Even if the merger is allowed to proceed, the CMA will likely demand a substantial number of store divestitures — which could present challenges in a market in which demand for large stores is declining.
• Sainsbury’s may need to consider reviewing the merger and look for alternatives to strengthening its business: The company has been losing market share and store standards have fallen. A challenging merger process could further distract management from confronting existing challenges.